Jamaica 10-Year Forecast for Growth and Fiscal Management

• According to Fitch Solutions, the Jamaican economy will rebound slowly in 2021 as tourism moderately recovers but remains below pre-pandemic levels. 
• In the medium term, however, Fitch Solutions expects Jamaica to see stronger economic performance following a reform programme, which will put the country on a more sustainable growth trajectory. 
• After poor economic governance led to two sovereign debt defaults since 2010, Jamaica is now closely coordinating policy with the IMF in a bid to improve its business environment, rein in government spending, diversify its economy and reduce its external vulnerabilities. As a result of recent and upcoming initiatives, Fitch is forecasting that real GDP growth will average 2.6% over the next decade. This remains significantly above the average of just 0.2% over the past 10 years. 
• Following difficult reforms, including streamlining the government and reducing public outlays, Jamaica's fiscal deficit has turned into a modest surplus, and Fitch expects this to continue over the coming decade. Its view for sustained fiscal consolidation is supported by efforts to expand the tax base. Although Jamaica has lowered its corporate tax rate as part of its ongoing efforts to improve the business environment and incentivize investment, the government has worked to simplify its consumption tax framework and eliminate tax breaks for some industries, which will lead to increased revenue over the long term. 
• Better fiscal management on the part of the central government is critical for Jamaica's future, since investors concerned about the country's long-term viability will need assurances that further defaults are not on the horizon. Fitch believes that a political consensus has emerged over demonstrating a firm commitment to more sustainable economic policy, which will underpin progress from a business environment standpoint.

(Source: Fitch Solutions)